The Economy: In English

Mom-0-nomics
	Tax Hike New rules quietly slice money from your paycheck. TheTTheiIIn 2012 the amount could exceed your yearly supply of laundry detergent.
	More Money The average American saw her earnings rise more than prices. TheTTheiIFind out here if you're average.
	Drink Wine And four other important steps to out-smart high prices. TheTTheiIBeat the stores!
	Teach New thinking says economic education should be taught in grades K-12 and way beyond. TheTTheiIDon't be left behind.
	Win People lose money in the market but if laws were broken, you could be reunited with your cash. TheTTheiIDid you invest here???
	Saftey Your guide to car seats, booster seats and back seats TheTTheList of laws.
	Shhhh Other people's surprising shopping plans and their economic effects. TheTTheLook what's on the list
	Buy It Sept. and Oct. are months to buy a new car. WheWhy dealers are desperate.
	Move Shopping for a new place to live is a big economic decision. WheSee the most expensive cities.

AOL's Lemon Drop.com invited the Home Economist to explain the early economic epidemic. Here's what she said....

Nobody has benefits anymore, so we're offering up the one resource we all have: other people's mothers. Each week a staff mom (nurse, guidance counselor, lawyer and shrink) will answer one of your questions.

This week, it's a Dow-crash-inspired economy Q&A with Guest Mom Brett Graff.

In layman's (not Lehman's) terms, what is going on with the economy right now?

Guest Mom Brett says:

"The catastrophe of the week is that investment banking giant Lehman Bros. went out of business just weeks after Bear Stearns closed its doors. Um, weren't we turning to these people for financial advice? Brett Graff
"The problems started about five years ago, when low mortgage rates made it, in many cases, cheaper to own a home than to rent one. There was also at that time a big push to help people with bad credit buy houses. Banks lent to high-risk borrowers and charged them more money for the loans -- higher interest rates. Know what? The banks don't actually hold on to all the loans they originate. They sell many of them to giant entities called Fannie Mae and Freddie Mac -- and they don't hold the mortgages either! They turn them into securities and sell shares ... just like the companies you see on the Stock Exchange.

"For a while, these sub-prime mortgages securities were lucrative -- borrowers were paying high rates, so those who owned the securities were getting high rates. Banks such as Lehman Bros. and Bear Stearns not only bought those mortgage-backed securities, but they considered them assets. Then they used these assets as collateral to borrow even more money. Eventually the music stopped: Home prices stopped rising; subprime borrowers couldn't pay the loans; homes went into foreclosure. Those mortgage-backed securities became near worthless. Not only did this affect the investment giants' assets, but they still owed the billions of dollars they borrowed. And it turned out to be a recipe for financial failure."

Guest Mom Brett Graff is The Home Economist™, reporting on the economic forces affecting real people. Brett is a money reporter and former economist with the U.S. government. In the next installment, she'll explain how this crash might affect you.